UISx3 Allocations for March 2020 vs. Reversion to the Mean

Home Forums Logical Invest Forum UISx3 Allocations for March 2020 vs. Reversion to the Mean

Viewing 11 posts - 1 through 11 (of 11 total)
  • Author
  • #77851

    The UISx3 strategy has a 60% allocation to TMF for March 2020. Given the extreme move lower in interest rates last month (February 2020), I would think TMF will revert to the mean and lose a lot of money in March 2020. Interest rates are unlikely to move much lower (if any), especially if central banks around the world begin coordinating their actions soon. Isn’t it very risky putting 60% in TMF at this time?


    Treasuries have probably already priced in one further FED emergency rate cut but you never know how the virus will spread in the US. If it gets much worse then the FED can do some more cuts.
    Anyway volatilities of all three asset classes topped 10-20 year maximums. In such situations it is pure hasard if you make any money. I personally prefer to stop investing until everything calms down.


    Would the VIX falling to, say, 25 or below, be a reasonable indicator to re-enter the markets?

    What other metrics do LI members find helpful?



    Yes I personaly think that it is always better to wait until volatility calms down and is at least below 25, but this is really not something “logic”. Many times if the correction is short lived it is better to stay invested. Most political issues are short lived and result only in V shaped corrections. A virus however can not be removed one day to the other.


    Frank, You stated that the volatility of the 3 asset classes topped 10 – 20 year maximum. What number of days did you used in your calculation of the volatility?


    I was just looking at ^VIX for the SP500, ^GVZ for Gold volatility and ^TYVIX for Treasury volatility.


    The allocations seem solid so far for March. Up 17% MTD!!! Interest rates continue to plummet and now people think they could go negative. If they do, TMF will continue to soar higher.


    Yes, until now the hedge seems to hold, but Treasuries will not rise forever like this would be possible for Gold. It seems to me that they are extremely overpriced and a much lower rate is already priced in.


    If one wanted to stay invested, would it make sense to rebalance early after such drastic moves? If so, what would be a reasonable criteria for the rebalance?


    I would never rebalance early after a move, because this way during a big drop, your SPY losses are limited and on the other side your profits get a boost.
    SPY dropped 19% with SPXL dropping “only” 50% not 3×19%=57%. TLT was up 17.8% and TMF 60% which is more than 3x. It is this difference, which helps the strategies a lot during big moves.


    TMF has collapsed this week and UGLD didnt help out much either. It all started about an hour before the market closed on Monday.

    I went all cash today because the whole market seems broken right now and I can live to fight another day once everything gets back to normal.

    No way should the rates be rising when the market is on free fall.

    If it is margin selling pressure and everyone is selling everything, then cash is king right now. This bond market has been something else these past few days.

    The only thing making money is VXX and TVIX and short ETFs. Frank or anyone at LI, if you see this message, is there anyway these could work as a better hedge than gold and treasuries? I think VXX is up more than 100% this month which is a much better hedge than TMF because of the fear and panic in this market condition. TVIX, which is always an excellent product to short, has risen from $40 to more than $400 over the past two weeks.

    Any insight would be most helpful. I wouldn’t be surprised if they shut the markets down for a period of time to stop the bleeding. This environment is absolutely crazy right now and it appears to just be getting started.

Viewing 11 posts - 1 through 11 (of 11 total)
  • You must be logged in to reply to this topic.